<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [ ]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12.
TRICORD SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[TRICORD SYSTEMS, INC. LOGO]
April 21, 2000
Dear Stockholder:
The date for this year's Annual Meeting is Thursday, May 18, 2000. It will be
held at the Radisson Hotel and Conference Center, 3131 Campus Drive, Plymouth,
Minnesota, beginning at 1:00 p.m., Minneapolis time.
The Annual Meeting is an opportunity for you to meet the management of your
Company. I look forward to seeing you.
IT IS VERY IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING, WHETHER YOU
CAN ATTEND OR NOT, AND I URGE YOU TO SIGN AND RETURN YOUR PROXY CARD IN THE
ENCLOSED ENVELOPE.
Sincerely,
/s/ John J. Mitcham
John J. Mitcham
Chairman and Co-Chief Executive Officer
<PAGE> 3
[TRICORD SYSTEMS, INC. LOGO]
TRICORD SYSTEMS, INC.
2905 Northwest Boulevard, Suite 20
Plymouth, Minnesota 55441
----------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 18, 2000
To the Stockholders of Tricord Systems, Inc.:
The Annual Meeting of the Stockholders of Tricord Systems, Inc. will be held on
Thursday, May 18, 2000, at 1:00 p.m., Minneapolis time, at the Radisson Hotel
and Conference Center, 3131 Campus Drive, Plymouth, Minnesota, for the following
purposes:
(1) To elect two directors for terms of three years.
(2) To consider and act upon a proposal to approve an amendment to the
Company's 1998 Stock Incentive Plan to increase the number of shares of
Common Stock reserved for issuance thereunder by 3,000,000 shares to a
total of 8,000,000 shares (plus any shares reserved, but not issued,
under the Company's 1995 Stock Incentive Plan).
(3) To consider and act upon a proposal to approve an amendment to the
Company's 1998 Non-Employee Director Stock Plan to increase the number
of shares of Common Stock reserved for issuance thereunder from 550,000
to 800,000 shares.
(4) To ratify the appointment of PricewaterhouseCoopers LLP, certified
public accountants, as independent auditors for the Company for the
year ending December 31, 2000.
(5) To transact such other business as may properly come before the meeting.
Only stockholders of record at the close of business on April 7, 2000 will be
entitled to vote at the meeting or any adjournments.
By Order of the Board of Directors,
/s/ Thomas C. Thomas
--------------------
Thomas C. Thomas
Secretary
April 21, 2000
<PAGE> 4
[TRICORD SYSTEMS, INC. LOGO]
TRICORD SYSTEMS, INC.
2905 Northwest Boulevard, Suite 20
Plymouth, Minnesota 55441
-------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 18, 2000
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors (the "Board") of Tricord Systems, Inc. (the "Company") of
proxies in the accompanying form from holders of shares of Common Stock to be
voted at the Annual Meeting of Stockholders to be held on May 18, 2000, at 1:00
p.m., Minneapolis time, at the Radisson Hotel and Conference Center, 3131 Campus
Drive, Plymouth, Minnesota (the "Annual Meeting").
Only stockholders of record as of the close of business on April 7, 2000 will be
entitled to vote at the Annual Meeting or any adjournments. On that date, the
Company had 20,984,111 shares of Common Stock outstanding. Each share is
entitled to one vote. The presence at the Annual Meeting, in person or by proxy,
of the holders of a majority of the outstanding shares of Common Stock entitled
to vote at the Annual Meeting (10,492,056 shares) is required for a quorum for
the transaction of business. In general, shares of Common Stock represented by a
properly signed and returned proxy card will be counted as shares present and
entitled to vote at the Annual Meeting for the purposes of determining a quorum,
without regard to whether the card reflects votes withheld from director
nominees or abstentions (or is left blank) or reflects a "broker non-vote" on a
matter (i.e., a card returned by a broker on behalf of its beneficial owner
customer that is not voted on a particular matter because voting instructions
have not been received and the broker has no discretionary authority to vote).
Because the director nominees who receive the greatest number of votes cast for
the election of directors at the Annual Meeting will be elected as directors,
votes that are withheld from the election of director nominees will be excluded
entirely from the vote and will have no effect. The other proposals described in
this Proxy Statement require the approval of a majority of the shares present
and entitled to vote in person or by proxy on that proposal. Shares voted as
abstaining on any of these proposals will be treated as shares present and
entitled to vote that were not cast in favor of the proposals, and thus will be
counted as votes against the particular proposal. Shares represented by a proxy
card that includes any broker non-votes on a matter will be treated as shares
not entitled to vote on that matter, and thus will not be counted in determining
whether that matter has been approved.
A proxy card is enclosed for your use. You are solicited on behalf of the Board
to SIGN AND RETURN THE PROXY CARD IN THE ACCOMPANYING ENVELOPE. No postage is
required if mailed within the United States. The cost of soliciting proxies,
including the preparation, assembly and mailing of the proxies and soliciting
material, as well as the cost of forwarding such material to the beneficial
owners of the Company's Common Stock, will be borne by the Company. Directors,
officers and regular employees of the Company may, without compensation other
than their regular compensation, solicit proxies by telephone, telegram or
personal conversation. The Company may reimburse brokerage firms and others for
expenses in forwarding proxy materials to the beneficial owners of Common Stock.
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Any stockholder giving a proxy may revoke it at any time prior to its use at the
Annual Meeting either by giving written notice of such revocation to the
Secretary of the Company, by filing a duly executed proxy bearing a later date
with the Secretary of the Company, or by appearing at the Annual Meeting and
filing written notice of revocation with the Secretary of the Company prior to
use of the proxy. Proxies will be voted as specified by stockholders.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE APPROVAL OF THE
PROPOSALS SET FORTH IN THE NOTICE OF MEETING.
This Proxy Statement and the enclosed form of proxy will be mailed to each
stockholder on or about April 21, 2000, together with the Annual Report to
Stockholders of the Company for the year ended December 31, 1999.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table contains information, as of April 7, 2000, regarding the
beneficial ownership of Common Stock of the Company, its only class of voting
securities, by each person known by the Company to own more than 5% of such
outstanding shares, each director, each of the executive officers named in the
summary compensation table, a certain other executive officer and the current
directors and executive officers of the Company as a group (consisting of ten
persons). Except as otherwise indicated, the stockholders listed in the table
have sole voting and investment power with respect to the shares indicated.
Shares subject to options exercisable within 60 days are treated as outstanding
only when determining the amount and percentage owned by such individual or
entity.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
--------- ----------
NAME SHARES CLASS
- ---- ------ -----
<S> <C> <C>
Joseph R. Canion 4,281,500(1) 18.6%
Yuval Almog 159,446(2) *
Tom R. Dillon 61,965(3) *
Donald L. Lucas 362,872(4) 1.7%
Fred G. Moore 55,760(5) *
John J. Mitcham 1,404,060(6) 6.6%
Alexander H. Frey 501,274(7) 2.4%
Charles E. Pearsall 291,617(8) 1.4%
Joan M. Wrabetz 100,000(9) *
All current directors and executive officers as a group
(10 persons) 7,252,744(10) 30.2%
</TABLE>
- -----------
* Less than 1%.
(1) Includes warrants issued December 15, 1998 to purchase 2,000,000 shares at
$3.50 per share, expiring December 15, 2003. Mr. Canion's address is 5 Post
Oak Park, Suite 1655, Houston, TX 77027.
(2) Includes options to purchase 10,000 shares that are exercisable on or
before June 6, 2000.
(3) Includes options to purchase 26,666 shares that are exercisable on or
before June 6, 2000.
(4) Includes 57,872 shares held by the Donald L. Lucas & Lygia S. Lucas Trust
DTD 12-3-84 and 227,500 shares held by the Donald L. Lucas Profit Sharing
Trust DTD 1-1-84. Also includes options to purchase 40,000 shares that are
exercisable on or before June 6, 2000. Also includes
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warrants issued December 15, 1998 to purchase 37,500 shares at $3.50 per
share, expiring December 15, 2003.
(5) Includes options to purchase 24,583 shares that are exercisable on or
before June 6, 2000.
(6) Includes options to purchase 272,619 shares that are exercisable on or
before June 6, 2000.
(7) Includes options to purchase 282,835 shares that are exercisable on or
before June 6, 2000.
(8) Includes options to purchase 192,375 shares that are exercisable on or
before June 6, 2000.
(9) Includes options to purchase 100,000 shares that are exercisable on or
before June 6, 2000.
(10) Includes options to purchase 980,328 shares that are exercisable on or
before June 6, 2000 and 2,037,500 shares of Common Stock issuable upon the
exercise of outstanding warrants.
ELECTION OF DIRECTORS
NOMINATION
The Company's Certificate of Incorporation, as amended, provides that the Board
shall consist of between one and nine members, as determined from time to time
by the Board, divided into three classes in as nearly equal number as possible.
The term of each class of directors is three years, and the term of one class
expires each year in rotation. The terms of the directors in Class A expire with
this Annual Meeting.
The Board has recommended that Donald L. Lucas and Fred G. Moore, the current
Class A directors, be nominated for election as directors in Class A to serve a
three-year term expiring at the 2003 Annual Meeting of Stockholders, or until
each of their respective successors are elected and qualified. Messrs. Lucas and
Moore each have consented to serve for the new term, if elected.
NOMINEES AND CONTINUING DIRECTORS
The nominees for election as directors and the continuing directors, their ages
(as of March 31, 2000), the year in which each first became a director and their
principal occupations or employment are as follows:
<TABLE>
<CAPTION>
YEAR FIRST
NAMES OF NOMINEES AND DIRECTORS PRINCIPAL OCCUPATION AGE BECAME DIRECTOR
- ------------------------------- -------------------- --- ---------------
Nominees for three-year term expiring in 2003:
<S> <C> <C> <C>
Donald L. Lucas Private Investor 70 1992
Fred G. Moore President of Horison, Inc. 52 1998
Directors not standing for election this year whose terms expire in 2002:
John J. Mitcham Chairman and Co-Chief Executive Officer of the 59 1995
Company
Tom R. Dillon Vice President of Operations of Netflix.com
Inc. 56 1998
</TABLE>
Director not standing for election this year whose term expires in 2001:
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<TABLE>
<S> <C> <C> <C>
Yuval Almog President of CORAL Group, Inc., a venture capital 50 1987
management company
</TABLE>
Except as indicated below, during the past five years, there has been no change
in the principal occupations or employment of the nominees for election as a
director or of the continuing directors.
Mr. Mitcham has been Co-Chief Executive Officer since May 13, 1999 and Chief
Executive Officer and a director of the Company since May 2, 1995, and was
elected Chairman in October 1998. From 1989 to May 1995, Mr. Mitcham served as
President and Chief Executive Officer of AT&T Paradyne Corporation.
Mr. Dillon joined NetFlix.com Inc. in April 1999 as its Vice President of
Operations. From January 1998 to March 1999, Mr. Dillon was Vice President and
Chief Information Officer at Candescent Technologies Corporation. From 1987 to
December 1997, Mr. Dillon was employed by Seagate Technology, Inc. in various
management positions, the last being Vice President and Chief Information
Officer.
Mr. Moore is President of Horison, Inc., an information strategies firm he
founded in March 1998. From 1976 to February 1998, Mr. Moore was employed at
Storage Technologies, Inc., most recently as Corporate Vice President, Strategic
Marketing. As described under "Compensation of Directors and Executive
Officers," Mr. Moore consulted with and assisted the Company in providing
professional marketing services with respect to certain of the Company's
products.
The following Board members also serve as directors of the designated public
companies: Mr. Almog - ebix.com, Inc. and RT-Set Real Time Synthesized
Entertainment Technology, Ltd.; Mr. Lucas - Cadence Design Systems, Inc.,
Coulter Pharmaceutical, Inc., Macromedia, Inc., Oracle Corporation, Preview
Systems, Inc. and Transcend Services, Inc.; and Mr. Mitcham - Reptron
Electronics, Inc.
COMMITTEES AND ATTENDANCE
The business and affairs of the Company are managed by the Board which met on
eight occasions and took action by written consent twice during 1999. Mr. Almog
and Mr. Dillon attended 100%, Mr. Moore attended 90% and Mr. Lucas attended 80%
of meetings of the Board during 1999.
The Board maintains standing committees of the Board including the Finance and
Audit Committee and the Compensation Committee. There is no Nominating Committee
of the Board.
The Finance and Audit Committee performs principally the following functions:
reviews the Company's current and long-range financial position, financial
policies and performance objectives; makes recommendations to the Board on
allocation of capital and banking relationships; evaluates retirement plan
investment management and fund performance; reviews the Company's business
insurance policies; recommends to the Board the engagement of the Company's
independent auditors; reviews with the independent auditors the plan and results
of the auditing engagement; reviews the adequacy of the internal accounting
controls; and reviews the range of audit and non-audit professional service
fees, approves such services and considers the independence of the Company's
independent auditors. The members of the Finance and Audit Committee are Messrs.
Dillon and Lucas. The Committee met once during 1999 and both Mr. Dillon and Mr.
Lucas attended. In January 2000 Mr. Almog was appointed as a member of the
Finance and Audit Committee.
The Compensation Committee reviews and recommends for approval to the Board the
remuneration arrangements for the Company's executive officers and the adoption
of compensation and option plans in which these persons and other key employees
of the Company may participate. The Compensation Committee also serves as the
disinterested committee administering the Company's various stock option plans.
The members of the Compensation Committee are Messrs. Almog and Lucas. The
Compensation Committee meet one and took action by written consent once during
1999 and both Mr. Almog and Mr. Lucas
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<PAGE> 8
attended.
DIRECTOR COMPENSATION
Non-employee directors receive an annual retainer of $10,000 plus $1,500 for
each Board meeting and committee meeting (if on a date other than a Board
meeting) attended and are reimbursed for travel and lodging expenses in
connection with attendance at Board and committee meetings. The 1998
Non-Employee Director Stock Plan (the "1998 Director Plan") provides that, in
the discretion of the Board, payment of the directors' annual cash retainer and
meeting fees may be made in the form of Company Common Stock. During 1999, the
non-employee directors received cash reimbursement for expenses in the following
amounts: Mr. Almog ($0); Mr. Dillon ($3,436); Mr. Lucas ($6,110); and Mr. Moore
($1,724).
Non-employee directors are entitled to participate in the 1998 Director Plan.
The 1998 Director Plan provides for automatic grants of non-qualified options to
the Company's non-employee directors. Currently, 550,000 shares are reserved for
issuance under the 1998 Director Plan. In accordance with the terms of the 1998
Director Plan, new non-employee directors of the Company who are first elected
or appointed to the Board to fill new directorships or vacancies will
automatically be granted, on a one-time basis on the date of their election or
appointment, non-qualified options to purchase 25,000 shares of Common Stock, at
an exercise price equal to the closing market price of the Common Stock on the
date of grant. The 1998 Director Plan further provides that, on January 5 of
each year, each non-employee director will automatically be granted additional
options to purchase 10,000 shares, with an exercise price equal to the closing
market price on the date of grant. The one-time option grants become exercisable
each month on a cumulative basis with respect to 2.78% of the total shares
covered by each such option, commencing one month after the date of grant and
terminating five years after the date of grant. Each annual option grant becomes
exercisable in full six months after its date of grant and terminates five years
after its date of grant.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Composed entirely of outside directors, the Compensation Committee of the Board
is responsible for reviewing and approving remuneration arrangements for the
Company's executive officers and the administration of compensation and stock
option plans in which these individuals and other key employees participate. In
addition, the committee reviews and provides direction for the development of
future leadership to meet the long-term organizational and growth objective
requirements of the Company.
COMPENSATION PHILOSOPHY AND OBJECTIVES. The Company's executive compensation
philosophy is to pay for individual and Company results. The objectives of the
Company's executive compensation program are to:
- reward the achievement of desired Company and individual performance goals;
- provide compensation that is competitive with other companies of comparable
size and complexity that will enable the Company to attract and retain key
executive talent; and
- align the interests of the Company's executives to stockholder return
through long-term opportunities for stock ownership.
In determining the compensation of the Company's executive officers, the
Compensation Committee considers a number of factors, including Company
performance, both separately and in relation to other companies competing in the
Company's markets, the individual performance of each executive officer,
comparative compensation surveys concerning compensation levels and stock grants
at other companies, historical compensation levels and stock awards at the
Company and the overall competitive environment for executives and the level of
compensation necessary to attract and retain key executive talent.
The Company's executive compensation program is comprised of base salary, annual
incentive
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<PAGE> 9
opportunities in the form of cash bonuses and long-term incentive opportunities
in the form of stock options. The Compensation Committee uses its discretion to
establish executive compensation at levels which, in its judgment, are warranted
by external and internal factors, as well as an executive's individual
circumstances. As a result, actual compensation levels may be greater or less
than the compensation levels at the companies used in the comparative analysis
based upon annual and long-term Company performance as well as individual
performance.
BASE SALARY. The Compensation Committee regularly reviews each executive's base
salary. Base salaries are determined by taking into account an executive's level
of responsibility, prior experience and competitive market data. The annual
merit program for executives is the same as for all of the Company's employees.
No executive officers were granted base salary increases for 2000.
The compensation of John J. Mitcham, the Company's Chairman and Co-Chief
Executive Officer, is determined in accordance with his employment agreement
with the Company, which was entered into in May 1995. Pursuant to this
employment agreement, Mr. Mitcham is paid an annual base salary that was
initially established at $300,000 in May 1995. Effective April 1, 1997, Mr.
Mitcham voluntarily reduced his annual base salary 20% to $240,000. Each year
the Compensation Committee conducts a performance and salary review of Mr.
Mitcham's base salary to determine whether it should be increased. Based on this
review, the Compensation Committee determined to maintain Mr. Mitcham's base
salary at $300,000, subject to Mr. Mitcham's voluntary reduction to $240,000. In
addition, the employment agreement provides that the Company will reimburse Mr.
Mitcham for premiums on a term life insurance policy up to a maximum of $3,500
per year. The Compensation Committee will conduct a performance and salary
review in May 2000 for the purpose of determining Mr. Mitcham's base salary for
the ensuing year, which review will be based upon both individual and Company
performance. In making its determination of base salary for Mr. Mitcham, the
Compensation Committee will consider the same factors as described above with
respect to all other executive officers.
ANNUAL CASH BONUSES. The philosophy of the Compensation Committee is to provide
executives with direct financial incentives in the form of annual cash bonuses
to achieve Company, business unit and individual performance goals. The
Compensation Committee does not have a fixed formula or criteria for determining
annual cash bonuses. Instead, the Compensation Committee, in its discretion,
establishes bonuses at year-end, based upon the extent to which the Company has
achieved its annual business plan and the individual executive has achieved his
goals. No annual cash bonuses were awarded to executive officers for 1999. In
March 2000, the Compensation Committee determined that Mr. Mitcham had achieved
certain performance goals related to a bonus option of 100,000 shares of Common
Stock granted in October 1998 and that such bonus option become exercisable in
full.
LONG-TERM INCENTIVES. The 1998 Stock Incentive Plan (the "1998 Plan") is a broad
"omnibus" plan that provides the Compensation Committee with significant
flexibility to award key executives stock options, restricted stock awards,
stock appreciation rights, performance units and stock bonuses. To date,
long-term incentives have been provided primarily in the form of stock options,
which are granted with an exercise price equal to the fair market value of the
Common Stock at the date of grant and become exercisable proportionately over a
period of time. Grants of all awards under the 1998 Plan are made by the
Compensation Committee in its discretion based upon an executive's contribution
toward Company performance and expected contribution toward meeting the
Company's long-term strategic goals. Because the value to an executive of the
various stock awards depends on increases in the market price of the Common
Stock, the Compensation Committee believes that this form of compensation aligns
an executive's compensation more closely with increases in stockholder value.
During 1999, the Compensation Committee did not grant new stock options to any
of its named executive officers.
TAX LAW CHANGES. The Omnibus Reconciliation Act of 1993 added Section 162(m) to
the Internal
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<PAGE> 10
Revenue Code of 1986, as amended (the "Code"). Section 162(m) generally
precludes the Company and other public companies from taking a tax deduction for
compensation over $1 million which is not "performance-based" and is paid, or
otherwise taxable, to executives named in the Summary Compensation Table and
employed by the Company at the end of the applicable tax year. The Company does
not believe that any named executive is likely to earn over $1 million in 2000.
Therefore, the Company does not have a policy at this time regarding qualifying
the compensation paid to its executive officers for deductibility under Section
162(m), but will formulate such a policy if compensation levels approach $1
million.
Compensation Committee,
Yuval Almog, Chairman
Donald L. Lucas
PROPOSAL TO APPROVE A CERTAIN AMENDMENT
TO THE 1998 STOCK INCENTIVE PLAN
PROPOSED AMENDMENT
In March 2000, the Board approved, subject to stockholder approval, a certain
amendment to its 1998 Stock Incentive Plan (the "1998 Plan"), and directed that
this amendment be submitted to the Company's stockholders for their approval.
The 1998 Plan was originally approved by the stockholders on May 15, 1998 and
certain amendments were approved by the stockholders on March 17, 1999.
The change to the 1998 Plan to be made by the proposed amendment is a 3,000,000
share increase in the number of shares of Common Stock that may be issued under
the 1998 Plan to 8,000,000 shares (plus any shares reserved for issuance, but
not issued, under the Company's 1995 Stock Incentive Plan).
PURPOSE OF THE PROPOSED AMENDMENT
The Company believes that providing stock option grants and other incentive
awards under the 1998 Plan is an important element in the overall success of the
Company. In general, the Board believes that equity-based incentives align the
interests of the Company's management and employees with those of the Company's
stockholders. In addition, providing stock option grants and other incentive
awards under the 1998 Plan is an important strategy for attracting and retaining
the type of high-quality executives, employees and advisors the Board believes
necessary for the Company to achieve its goals. Given the intense competition
for such personnel, the Board believes that its ability to offer competitive
compensation packages, including those with equity-based incentive components,
is particularly important in attracting and retaining qualified candidates. The
Board also believes that it will be necessary for the Company to offer
significant equity incentives to these types of individuals and that it will
therefore be necessary to increase significantly the number of shares available
for issuance under the Company's stock-based compensation plans.
SUMMARY OF THE 1998 PLAN
A general description of the basic features of the 1998 Plan is outlined below.
Unless otherwise indicated, the following summary of the principal provisions of
the 1998 Plan assumes the approval of the foregoing proposed amendment to the
1998 Plan. This summary is qualified in its entirety by reference to the full
text of the 1998 Plan, as amended, a copy of which may be obtained from the
Company at the address set forth at the beginning of this Proxy Statement.
The 1998 Plan provides for the grant to participating eligible recipients of the
Company of stock options
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<PAGE> 11
("Options"), including both incentive stock options ("Incentive Options") and
non-statutory stock options ("Non-Statutory Options"), Restricted Stock Awards,
Performance Units, Stock Bonuses and Stock Appreciation Rights. Options,
Restricted Stock Awards, Performance Units, Stock Bonuses and Stock Appreciation
Rights are collectively referred to as "Incentive Awards."
ADMINISTRATION. The 1998 Plan may be administered by the Board or by a committee
consisting of not less than two members of the Board (the Board or any such
committee is referred to as the "Committee"). The 1998 Plan vests broad powers
in the Committee to administer and interpret the 1998 Plan, including the
authority to select the participants that will be granted Incentive Awards under
the 1998 Plan, to determine the nature, extent, timing, exercise price, vesting
and duration of Incentive Awards and to prescribe all other terms and conditions
of Incentive Awards that are consistent with the 1998 Plan. The Committee may
modify the terms of an outstanding Incentive Award in any manner (with the
consent of the affected participant for most modifications) as long as the
modified terms are permitted by the 1998 Plan as then in effect.
SHARES TO BE AWARDED. Prior to the proposed amendment of the 1998 Plan described
in this Proxy Statement, there were authorized for issuance under the 1998 Plan
5,000,000 shares of Common Stock, plus any shares of Common Stock that are not
issued under the Company's 1995 Stock Incentive Plan. The amendment to the 1998
Plan proposed hereby would increase the number of shares authorized under the
1998 Plan from 5,000,000 to 8,000,000 shares. As of April 7, 2000, 502,907
shares of Common Stock had been issued upon the exercise of options granted
under the 1998 Plan, options to purchase 3,956,125 shares of Common Stock at a
weighted average exercise price of $4.65 were outstanding and 781,868 shares
remained available under the 1998 Plan. Assuming approval of an increase of
3,000,000 shares to the 1998 Plan, 3,781,868 shares would be available for
future grant.
No participant in the 1998 Plan may be granted, during each year during the term
of the 1998 Plan, any Options or Stock Appreciation Rights or any other
Incentive Awards with a value based solely on an increase in the value of the
Common Stock after the date of grant, relating to more than an aggregate of
500,000 shares of Common Stock.
Any shares of Common Stock that are subject to an Incentive Award that expires
or is terminated and any shares of Common Stock that are subject to an Incentive
Award that is settled or paid in cash or any form other than shares of Common
Stock will again become available for issuance under the 1998 Plan. Any shares
of Common Stock that constitute the forfeited portion of a Restricted Stock
Award, however, will not become available for further issuance under the 1998
Plan. In the event of any reorganization, merger, recapitalization, stock
dividend, stock split or similar change in the corporate structure or shares of
the Company, appropriate adjustments will be made to the number and kind of
shares reserved under the 1998 Plan and under outstanding Incentive Awards and
to the exercise price of outstanding Options.
PARTICIPANTS. All employees (including officers and directors who are also
employees) and all non-employee consultants and independent contractors of the
Company are eligible to participate in the 1998 Plan. On April 7, 2000, there
were approximately 30 full-time employees of the Company eligible to be granted
Incentive Awards under the 1998 Plan.
OPTIONS. Incentive Options and Non-Statutory Options must be granted with an
exercise price equal to at least the fair market value of the Common Stock on
the date of grant. On April 7, 2000, the closing price per share of the Common
Stock as reported on the Nasdaq SmallCap Market System was $9.94. Options will
become exercisable at such times and in such installments as may be determined
by the Committee, provided that Options may not become exercisable prior to six
months from their date of grant and may not be exercisable after 10 years from
their date of grant.
The exercise price of options must be paid in cash, except that the Committee
may allow payment to be made (in whole or in part) by delivery of a "broker
exercise notice" (pursuant to which the broker or dealer
9
<PAGE> 12
is instructed to sell enough shares or loan the optionee enough money to pay the
exercise price and to remit such sums to the Company), a promissory note or by
transfer of shares of Common Stock (either previously owned by the participant
or to be acquired upon Option exercise). The aggregate fair market value of
shares of Common Stock with respect to which incentive stock options within the
meaning of Section 422 of the Code become exercisable for the first time by a
participant in any calendar year may not exceed $100,000. Any Incentive Options
in excess of this amount will be treated as Non-Statutory Options.
STOCK APPRECIATION RIGHTS. A Stock Appreciation Right is a right to receive a
payment from the Company in the form of shares or cash or a combination of both
(as determined by the Committee), equal to the difference between the fair
market value of one or more shares of Common Stock and the exercise price of
such shares under the terms of the Stock Appreciation Right. The exercise price
of a Stock Appreciation Right will be determined by the Committee, but may not
be less than the fair market value of the Common Stock on the date of grant.
Stock Appreciation Rights become exercisable at such times and in such
installments as may be determined by the Committee, except that Stock
Appreciation Rights may not become exercisable prior to six months from their
date of grant and may not be exercisable after 10 years from their date of
grant.
RESTRICTED STOCK AWARDS. A Restricted Stock Award is an award of Common Stock
that vests at such times and in such installments as may be determined by the
Committee and, until it vests, is subject to restrictions on transferability and
to the possibility of forfeiture. The Committee may impose such restrictions or
conditions to the vesting of Restricted Stock Awards as it deems appropriate,
including that the participant remain in the continuous employ or service of the
Company for a certain period or that the participant or the Company satisfy
certain performance goals or criteria. No Restricted Stock Award may vest prior
to six months from its date of grant.
Unless the Committee determines otherwise, any dividends or distributions
(including regular quarterly dividends) paid with respect to shares of Common
Stock subject to the unvested portion of a Restricted Stock Award will be
subject to the same restrictions as the shares to which such dividends or
distributions relate. In addition, the Committee may require that regular
quarterly cash dividends be reinvested in shares of Common Stock.
STOCK BONUSES. A Stock Bonus is an award of Common Stock that is not subject to
risk of forfeiture. A Stock Bonus may be granted without any restrictions, or
the Common Stock covered by the Award may be made subject to restrictions on
transferability.
PERFORMANCE UNITS. A Performance Unit is a right to receive a payment from the
Company, in the form of shares or cash or a combination of both (as determined
by the Committee), upon the achievement of established performance goals. A
Performance Unit will vest at such times and in such installments as may be
determined by the Committee. The Committee may impose such restrictions or
conditions to the vesting of Performance Units as it deems appropriate,
including that the participant remains in the continuous employ or service of
the Company for a certain period or that the participant or the Company satisfy
certain performance goals or criteria.
CHANGE IN CONTROL. See "Executive Compensation--Change in Control Arrangements",
below in this Proxy Statement, for a discussion regarding the effect of a
"change in control" on Incentive Awards granted under the 1998 Plan.
EFFECT OF TERMINATION OF EMPLOYMENT OR SERVICE. In the event a participant's
employment or other service with the Company is terminated by reason of death,
disability or retirement, (i) all outstanding Options and Stock Appreciation
Rights will remain exercisable to the extent then exercisable for a period of
one year after such termination (three months in the case of retirement), but in
no event after their original expiration date, (ii) all Restricted Stock Awards
then held by the participant will become fully vested and nonforfeitable, and
(iii) all Performance Units and Stock Bonuses then held by the participant will
vest or
10
<PAGE> 13
continue to vest according to their original terms.
In the event a participant's employment or other service with the Company is
terminated for any other reason, (ii) all outstanding Options and Stock
Appreciation Rights will immediately terminate without notice, (ii) all
Restricted Stock Awards that have not vested as of such termination will be
terminated and forfeited, and (iii) all Performance Units and Stock Bonuses then
held by the participant will vest or continue to vest according to their
original terms; provided, however, that if such termination is due to any reason
other than the voluntary termination by the participant or termination by the
Company for cause, all Options and Stock Appreciation Rights will remain
exercisable for three months to the extent then exercisable.
The Company may, in its discretion, modify these post-termination provisions,
provided that no Incentive Award may become exercisable or vest prior to six
months from its date of grant and no Option or Stock Appreciation Rights may
remain exercisable beyond its expiration date.
FEDERAL INCOME TAX CONSEQUENCES
The following general description of federal income tax consequences is based on
current statutes, regulations and interpretations. This description is not
intended to address specific tax consequences applicable to an individual
participant who receives an Incentive Award and does not address special rules
that may be applicable to directors, officers and greater-than-10% stockholders
of the Company.
OPTIONS. There will not be any federal income tax consequences to either the
participant or the Company as a result of the grant to a participant of an
Option under the 1998 Plan. The exercise by a participant of an Incentive Option
will also not result in any federal income tax consequences to the Company or
the participant, except that an amount equal to the excess fair market value of
the shares acquired upon exercise of the Incentive Option, determined at the
time of exercise, over the consideration paid for the shares by the participant
will be a tax preference item for purposes of the alternative minimum tax. Upon
the exercise of a Non-Statutory Option, a participant will recognize ordinary
income on the date of exercise in an amount equal to the difference between the
fair market value of the shares purchased and the consideration paid for the
shares. In general, the Company will be entitled to a compensation expense
deduction in connection with the exercise of a Non-Statutory Option for any
amounts includable in the taxable income of a participant as ordinary income.
If a participant disposes of the shares acquired upon exercise of an Incentive
Option, the federal income tax consequences will depend upon how long the
participant has held the shares. If the participant does not dispose of the
shares within two years after the Incentive Option was granted, or within one
year after the participant exercised the Incentive Option and the shares were
transferred to the participant, then the participant will recognize a long-term
capital gain or loss. The amount of the long-term capital gain or loss will be
equal to the difference between (i) the amount the participant realized on
disposition of the shares and (ii) the option price at which the participant
acquired the shares. The Company is not entitled to any compensation expense
deduction under these circumstances.
If the participant does not satisfy both of the above holding period
requirements, then the participant will be required to report as ordinary
income, in the year the participant disposes of the shares, the amount by which
the lesser of the fair market value of the shares at the time of exercise of the
Incentive Option or the amount realized on the disposition of the shares (if the
disposition is the result of a sale or exchange to one other than a related
taxpayer) exceeds the option price for the shares. The Company will be entitled
to a compensation expense deduction in an amount equal to the ordinary income
includable in the taxable income of a participant. The remainder of the gain or
loss recognized on the disposition, if any, will be treated as long-term or
short-term capital gain or loss, depending on the holding period.
STOCK APPRECIATION RIGHTS. A participant who receives a Stock Appreciation Right
will not recognize any
11
<PAGE> 14
taxable income at the time of grant. Upon exercise of a Stock Appreciation
Right, the participant will realize ordinary income in an amount equal to the
cash and fair market value of any shares of Common Stock received by the
participant. The Company will receive a corresponding tax deduction for any
amounts includable by the participant as ordinary income.
RESTRICTED STOCK AWARDS AND STOCK BONUSES. With respect to shares issued
pursuant to a Restricted Stock Award that are not subject to risk of forfeiture
or with respect to Stock Bonuses, a participant will include as ordinary income
in the year of receipt an amount equal to the fair market value of the shares
received in the date of receipt. With respect to shares that are subject to a
risk of forfeiture, a participant may file an election under Section 83(b) of
the Code within 30 days after the receipt to include as ordinary income in the
year of receipt an amount equal to the fair market value of the shares received
on the date of receipt (determined as if the shares were not subject to any risk
of forfeiture). If a Section 83(b) election is made, the participant will not
recognize any additional income when the restrictions on the shares issued in
connection with the Restricted Stock Award lapse. The Company will receive a
corresponding tax deduction for any amounts includable by the participant as
ordinary income.
A participant who does not make a Section 83(b) election within 30 days of a
Restricted Stock Award that is subject to a risk of forfeiture will recognize
ordinary income at the time of the lapse of the restrictions in an amount equal
to the then fair market value of the shares freed of restrictions. The Company
will receive a corresponding tax deduction for any amounts includable by the
participant as ordinary income.
PERFORMANCE UNITS. A participant who receives a Performance Unit will not
recognize any taxable income at the time of grant. Upon settlement of the
Performance Unit, the participant will realize ordinary income in an amount
equal to the cash and fair market value of any shares of Common Stock received
by the participant. The Company will receive a corresponding tax deduction for
any amounts includable by the participant as ordinary income.
EXCISE TAX ON PARACHUTE PAYMENTS. The Code imposes a 20% excise tax on the
recipient of "excess parachute payments," as defined in the Code, and denies tax
deductibility to the Company for such excess parachute payments. Generally,
parachute payments are payments in the nature of compensation to employees of a
company who are officers, shareholders or highly compensated employees, which
payments are contingent upon a change in control of a company. Acceleration of
the vesting of Incentive Awards upon a change in control of the Company may
constitute parachute payments and, in certain cases, "excess parachute
payments." The 1998 Plan limits the acceleration of such vesting to avoid excess
parachute payments unless the participant is subject to a separate agreement
with the Company (as is the case of Mr. Mitcham) which specifically provides
that excess parachute payments attributable to accelerated vesting will not
reduce other payments from the Company.
SECTION 162(M). Under Section 162(m) of the Code, the deductibility of certain
compensation paid to the chief executive officer and each of the four other most
highly compensated executives of publicly held companies is limited to
$1,000,000. Compensation for this purpose generally includes any items of
compensation expense described above in connection with Incentive Awards under
the 1998 Plan. However, certain types of compensation are excepted from this
limit, including compensation that qualifies as "performance-based
compensation." Under Section 162(m), any compensation expense resulting from the
exercise of Options or Stock Appreciation Rights under the 1998 Plan with
exercise prices equal to (or greater than) the fair market value of the Common
Stock on the date of grant should qualify as "performance-based compensation"
excepted from the limit of Section 162(m). However, compensation expense in
connection with any other Incentive Awards under the 1998 Plan would be subject
to this limit.
RECOMMENDATION OF THE BOARD
The Board recommends a vote FOR approval of the amendments to the 1998 Plan. The
affirmative vote of the holders of a majority of shares of Common Stock present
in person or by proxy at the Annual Meeting,
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<PAGE> 15
assuming a quorum is present, is necessary for approval. Unless a contrary
choice is specified, proxies solicited by the Board will be voted FOR approval
of such proposed amendments.
PROPOSAL TO APPROVE A CERTAIN AMENDMENT
TO THE 1998 NON-EMPLOYEE DIRECTOR STOCK PLAN
PROPOSED AMENDMENT
In March 2000, the Board approved, subject to stockholder approval, a certain
amendment to its 1998 Non-Employee Director Stock Plan (the "1998 Director
Plan"), and directed that this amendment be submitted to the Company's
stockholders for their approval. The 1998 Director Plan was originally approved
by the stockholders on May 15, 1998.
The change to the 1998 Director Plan to be made by the proposed amendment is a
250,000 share increase in the number of shares of Common Stock that may be
issued under the 1998 Director Plan, from 550,000 to 800,000 shares.
PURPOSE OF THE PROPOSED AMENDMENT
The 1998 Director Plan provides for awards of options and Common Stock to
directors who are not employees of the Company. The purpose of the 1998 Director
Plan generally is to advance the interests of the Company and its stockholders
by enabling the Company to attract and retain the services of experienced and
knowledgeable non-employee directors and to align the interest of such directors
with the Company's long-term success and progress and with the interests of the
Company's stockholders. Accordingly, the purpose of the proposed amendment to
the 1998 Director Plan is to further these general objectives by expanding the
Board's ability to make awards under the 1998 Director Plan and attract and
retain such individuals.
SUMMARY OF THE 1998 DIRECTOR PLAN
A general description of the basic features of the 1998 Director Plan is
outlined below. Unless otherwise indicated, the following summary of the
principal provisions of the 1998 Director Plan assumes the approval of the
foregoing proposed amendment to the 1998 Director Plan. The summary is qualified
in its entirety by the full text of the plan, a copy of which may be obtained
from the Company at the address set forth at the beginning of this Proxy
Statement.
ADMINISTRATION; PARTICIPATION. The 1998 Director Plan is administered by the
Board. Directors of the Company who are not employees of the Company are
eligible to participate in the 1998 Director Plan.
SHARES TO BE AWARDED. Prior to the proposed amendment to the 1998 Director Plan
described in this Proxy Statement, there were authorized for issuance under the
1998 Director Plan 550,000 shares of Common Stock. The amendment to the 1998
Director Plan proposed hereby would increase the number of shares authorized for
issuance under the 1998 Director Plan by 250,000 shares, from 550,000 to 800,000
shares. As of April 7, 10,000 shares of Common Stock had been issued upon the
exercise of options under the 1998 Director Plan, and options to purchase
140,000 shares of Common Stock at a weighted average price of $2.40 were
outstanding. Accordingly, 141,751 shares remain available for future grant.
Assuming approval of an increase of 250,000 shares to the 1998 Director Plan,
391,751 shares would be available for future grants.
In the event of any reorganization, merger, recapitalization, liquidation,
reclassification, stock dividend, stock split, combination of shares, rights
offerings, or extraordinary dividend or divestiture or any other change in the
corporate structure or shares of the Company, the Board shall make adjustments,
determined
13
<PAGE> 16
by the Board in its discretion to be appropriate, as to the number and kind of
securities subject to and reserved under the 1998 Director Plan and, in order to
prevent dilution or enlargement of rights of eligible directors, the number,
kind and exercise price of outstanding awards of options and Common Stock. The
Board may amend the 1998 Director Plan from time to time in such respects as the
Board may deem advisable in order that awards of options and Common Stock under
the 1998 Director Plan will conform to any change in applicable laws or
regulations or in any other respect the Board may deem to be in the best
interests of the Company; provided, however, that no amendment to the 1998
Director Plan will be effective without approval of the stockholders of the
Company if stockholder approval is then required pursuant to the rules of any
stock exchange or Nasdaq or similar regulatory body. Awards of options and
Common Stock may not be transferred other than by will or the laws of descent
and distribution, and during the lifetime of an optionee may be exercised only
by the optionee. The 1998 Director Plan will terminate on February 20, 2003,
unless sooner terminated by action of the Board. No awards of options and Common
Stock will be granted after termination of the 1998 Director Plan.
DIRECTOR OPTIONS. Under the 1998 Director Plan, each eligible director
automatically receives, on a one-time basis, a non-qualified option to purchase
25,000 shares of Common Stock (the "Initial Option") upon such director's
initial election or appointment to the Board. In addition to the Initial Option,
a non-qualified option to purchase 10,000 shares of Common Stock (the "Annual
Option") is granted automatically on each January 5 to each eligible director as
of such dates. The Initial Options and Annual Options are sometimes collectively
referred to as "Director Options."
Each Initial Option becomes exercisable each month on a cumulative basis with
respect to 2.78% of the total shares covered by such Initial Option, commencing
one month after the date of grant and terminates five years after its date of
grant. The Annual Option becomes exercisable in full six months after its date
of grant and terminates five years after its date of grant. The exercise price
per share to be paid by an eligible director at the time a Director Option is
exercised will be the closing market price of one share of Common Stock on the
date of grant, determined based upon the closing price of the Common Stock as
reported by the Nasdaq SmallCap Market on the date of grant. On April 7, 2000,
the closing price of one share of Common Stock as reported by the Nasdaq
SmallCap Market was $9.94. A Director Option may be exercised by an eligible
director in whole or in part from time to time by delivery to the Company of a
written notice of exercise, accompanied by payment in cash or personal check
payable to the Company, of the full exercise price for the shares being
purchased. In the event that an eligible director's service as a director
terminates, the Director Options will remain exercisable for three months after
such termination (one year with respect to termination due to death or
disability and immediate termination with respect to termination of service by
the director or termination by the Company for "cause"). In no event, however,
may Director Options be exercised after their expiration date.
RETAINER STOCK AND MEETING STOCK. In the Board's discretion, the $10,000 annual
retainer to which eligible directors are entitled on each November 1 may be paid
in the form of cash or Common Stock. If payment is made in Common Stock, each
eligible director as of such dates will receive such number of shares of Common
Stock (the "Retainer Stock") as equals $10,000 divided by the fair market value
of one share of Common Stock as of each immediately preceding October 31.
In addition, in the Board's discretion, the $1,500 meeting fee to which eligible
directors are entitled may be paid in the form of cash or Common Stock. If
payment is made in Common Stock, each eligible director as of such meeting dates
will receive such number of shares of Common Stock (the "Meeting Stock") as
equals $1,500 divided by the fair market value of one share of Common Stock as
of each immediately preceding day in which trading occurs on the Nasdaq SmallCap
Market.
FEDERAL INCOME TAX CONSEQUENCES
The following general description of federal income tax consequences is based on
current statutes, regulations and interpretations. This description is not
intended to address specific tax consequences
14
<PAGE> 17
applicable to any one eligible director who receives Director Options, Retainer
Stock or Meeting Stock.
DIRECTOR OPTIONS. There will not be any federal income tax consequences to
either the eligible director or the Company upon grant of a Director Option.
Upon exercise of a Director Option, an eligible director will generally
recognize ordinary income on the date of exercise in an amount equal to the
difference between the fair market value of the shares purchased and the
consideration paid for the shares. In general, the Company will be entitled to a
compensation expense deduction in connection with the exercise of a Director
Option for any amounts includable in the taxable income of an eligible director
as ordinary income.
RETAINER STOCK AND MEETING STOCK. With respect to shares issued as Retainer
Stock and Meeting Stock, the participant will include as ordinary income in the
year of transfer an amount equal to the fair market value of the shares
transferred. The Company will receive a corresponding tax deduction for any
amounts includable in the taxable income of the participant as ordinary income.
PLAN BENEFITS
The following table illustrates the options and the shares of Retainer Stock and
Meeting Stock that the eligible directors of the Company as a group have been
granted under the 1998 Director Plan.
PLAN BENEFITS
1998 DIRECTOR PLAN
<TABLE>
<CAPTION>
Number of Shares Number of Shares Number of Shares
Underlying of Retainer Stock of Meeting Stock
Name and Position Options Granted Granted Granted
- ----------------- --------------- ------- -------
<S> <C> <C> <C>
Non-Executive Director Group 140,000(1) 117,929(2) 140,320(3)
</TABLE>
- -----------
(1) Includes Annual Option of 10,000 Mr. Lucas, as of January 2, 1998 and
Initial Options of 50,000 granted, 25,000 each to Mr. Dillon and Mr. Moore,
and Annual Options of 40,000 granted, 10,000 each to Messrs. Almog, Dillon,
Lucas and Moore, as of January 5, 1999 and Annual Options of 40,000
granted, 10,000 each to Messrs. Almog, Dillon, Lucas and Moore, as of
January 5, 2000.
(2) Includes 28,233 shares issued in payment of the November 1997 retainer and
80,000 shares issued in payment of the November 1998 retainer and 9,696
shares issued in payment of the November 1999 retainer.
(3) Includes 113,653 shares issued in payment of Board meeting fees, and 26,667
shares issued to Mr. Almog in payment of annual retainer fees for previous
years.
RECOMMENDATION OF THE BOARD
The Board recommends a vote FOR approval of the amendment to the 1998 Director
Plan. The affirmative vote of the holders of a majority of shares of Common
Stock present in person or by proxy at the Annual Meeting, assuming a quorum is
present, is necessary for approval. Unless a contrary choice is specified,
proxies solicited by the Board will be voted FOR approval of such proposed
amendment.
COMPARATIVE STOCK PERFORMANCE
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<PAGE> 18
The graph below compares the cumulative total return during the period January
1, 1995 to December 31, 1999 for the Company's Common Stock, the Nasdaq - U.S.
Index and the Nasdaq - Computer Manufacturer Stock Index. This graph assumes the
investment on January 1, 1995 of approximately $100 in the Company's Common
Stock and the stock in the companies presented in the Nasdaq - U.S. Index and
the Nasdaq - Computer Manufacturer Stock Index on January 1, 1995 and the
reinvestment of all dividends.
<TABLE>
<CAPTION>
NASDAQ NASDAQ TRICORD
STOCK COMPUTER SYSTEMS,
MARKET - US MANUFACTURERS INC.
----------- ------------- --------
<S> <C> <C> <C>
12/31/94 100.000 100.000 100.000
3/31/95 108.951 105.388 97.619
6/30/95 124.623 128.125 71.429
9/30/95 139.634 154.150 86.895
12/31/95 141.335 157.450 57.143
3/31/96 147.952 162.245 78.571
6/30/96 160.006 182.385 85.714
9/30/96 165.705 201.120 51.181
12/31/96 173.892 211.091 28.571
3/31/97 164.463 177.414 11.905
6/30/97 194.590 229.306 23.810
9/30/97 222.521 287.836 19.048
12/31/97 213.073 255.345 9.524
3/31/98 249.365 314.205 20.838
6/30/98 256.215 372.211 21.429
9/30/98 231.371 407.322 9.524
12/31/98 300.248 553.257 42.857
3/31/99 335.857 622.543 48.210
6/30/99 367.468 689.736 67.867
9/30/99 325.848 776.463 66.667
12/31/99 542.430 1,163.207 92.857
</TABLE>
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<PAGE> 19
EXECUTIVE COMPENSATION
The following table provides summary information concerning cash and non-cash
compensation paid to or earned by the Company's Co-Chief Executive Officer and
the four most highly paid executive officers of the Company, all of whom
received or earned cash and non-cash salary and bonus of more than $100,000 for
the fiscal year ended December 31, 1999 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING ALL OTHER
NAME AND PRINCIPAL YEAR SALARY BONUS COMPENSATION STOCK OPTIONS COMPENSATION
- ------------------- ---- ------ ----- ------------ ------------
POSITION (1) (2) (3) AWARDS (SHARES) (4)
- -------- --- --- --- ------ -------- ---
<S> <C> <C> <C> <C> <C> <C> <C>
John J. Mitcham 1999 $240,000 $ -- $ 3,500 $ -- 566,369 $1,000
Chairman and Co- 1998 240,000 -- 186,502 -- 566,369 1,000
Chief Executive Officer 1997 270,000 -- -- -- 800,000(5) 1,000
Joseph R. Canion (6) 1999 -- -- -- -- -- --
Co-Chief Executive 1998 -- -- -- -- -- --
Officer 1997 -- -- -- -- -- --
J. David Cabello 1999 112,500 -- -- -- 500,000 1,000
Vice President and 1998 10,288 -- -- 196,875(7) 500,000 --
General Counsel 1997 -- -- -- -- -- --
Kathleen H. Clark 1999 150,000 -- -- -- 500,000 1,000
Vice President, 1998 10,288 -- -- 196,875(7) 500,000 --
Marketing 1997 -- -- -- -- -- --
Alexander H. Frey 1999 160,000 -- -- -- 540,000 1,000
Senior Vice President, 1998 122,500 25,000 150 75,000(8) 540,000 1,000
Architecture 1997 103,752 25,000 86,537 -- 300,000(5) 1,000
Charles E. Pearsall 1999 150,000 -- -- -- 350,500 1,000
Vice President, 1998 115,833 30,000 -- -- 350,500 1,000
Engineering 1997 95,000 35,000 24,316 -- 175,000(5) 1,000
</TABLE>
- ------------
(1) The following Named Executive Officers elected to receive a portion of
their 1998 fourth quarter salary in the form of Common Stock at the closing
price on the day such salary was due: Mr. Mitcham ($60,000; 78,556 shares);
Mr. Frey ($4,500; 5,892 shares); and Mr. Pearsall ($3,600; 4,714 shares).
(2) Bonuses for services rendered have been included as compensation for the
year earned, even though such bonuses may have actually been paid in the
following year. For bonuses earned in 1998, the following Named Executive
Officers elected to receive their 1998 bonuses in the form of Common Stock
at the closing price on January 29, 1999, the day prior to the date of
Board approval of such bonuses: Mr. Frey ($25,000; 7,547 shares) and Mr.
Pearsall ($30,000; 9,056 shares). For bonuses earned in 1997, the following
Named Executive Officers elected to receive their bonuses in the form of
Common Stock at the closing price on February 12, 1998, the day the Board
approved such
17
<PAGE> 20
bonuses: Mr. Frey ($25,000; 40,000 shares) and Mr. Pearsall ($35,000;
56,000 shares).
(3) "Other Annual Compensation" consists of the following: For 1999, refund of
life insurance premiums for Mr. Mitcham; For 1998 relocation assistance and
refund of life insurance premiums for Mr. Mitcham, which Mr. Mitcham
elected to receive in the form of Common Stock at the closing price on the
day the Board approved such payments (relocation assistance, $172,502;
230,003 shares at $0.75 per share, and refund of life insurance premiums,
$14,000; 14,451 shares at $0.97 per share), and a recognition award to Mr.
Frey; For 1997, relocation assistance to Mr. Frey and Mr. Pearsall.
(4) "All Other Compensation" consists of the Company's matching contribution to
the employees' accounts in the Company's 401k Retirement Plan.
(5) Certain options previously granted in 1995 and 1996 were canceled and
reissued in 1997 at the then market price as follows: Mr. Mitcham, 800,000
shares; Mr. Frey 100,000 shares; and Mr. Pearsall, 100,000 shares.
(6) Mr. Canion is a Co-Chief Executive Officer of the Company and an employee
but does not receive compensation.
(7) Effective December 7, 1998, the Company granted to Mr. Cabello and Ms.
Clark restricted stock awards, each consisting of 300,000 shares of Common
Stock that are restricted and subject to forfeiture in satisfaction of
certain contingent obligations of the Company. Such award is valued for
purposes of the above table based on the closing price of the Common Stock
on the date of grant. The restrictions on these shares lapse with respect
to 100,000 shares if Mr. Cabello and Ms. Clark remain in the employ of the
Company until a financing arrangement is completed, with respect to 100,000
shares if Mr. Cabello and Ms. Clark remain in the employ of the Company
until December 1, 1999, and with respect to 100,000 shares if Mr. Cabello
and Ms. Clark remain in the employ of the Company until December 1, 2000.
As of December 31, 1999, each had restrictions that lapsed on 200,000 such
shares of restricted Common Stock and each had 100,000 such shares of
restricted Common Stock each with a value of $487,500 based on the closing
price of the Common Stock as of such date. In February 2000, Mr. Cabello
and Ms. Clark terminated their employment with the Company resulting in the
forfeiture of 100,000 shares each of the unvested portion of the restricted
stock awards.
(8) Effective November 3, 1998, the Company granted to Mr. Frey a restricted
stock award consisting of 150,000 shares of Common Stock that are
restricted and subject to forfeiture in satisfaction of certain contingent
obligations of the Company. Such award is valued for purposes of the above
table based on the closing price of the Common Stock on the date of grant.
The restrictions on these shares lapse with respect to 75,000 shares if Mr.
Frey remains in the employ of the Company until December 1, 1999 and with
respect to the remaining 75,000 shares if Mr. Frey remains in the employ of
the Company until December 1, 2000. As of December 31, 1999, 75,000 such
shares of restricted Common Stock had a value of $365,625, based on the
closing price of the Common Stock as of such date.
OPTIONS
The following tables provide certain information regarding option grants and
exercises during 1999 to or by the executive officers named in the Summary
Compensation Table above and the number and value of the options held by such
persons at the end of 1999.
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<PAGE> 21
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS (1)
------------------------------------------------------------
POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM (2)
OPTIONS EMPLOYEES IN EXERCISE OR EXPIRATION
NAME GRANTED 1999 BASE PRICE DATE 5% 10%
---- ------- ---- ---------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
John J. Mitcham -- -- -- -- -- --
Joseph R. Canion -- -- -- -- -- --
J. David Cabello -- -- -- -- -- --
Kathleen H. Clark -- -- -- -- -- --
Alexander H. Frey -- -- -- -- -- --
Charles E. Pearsall -- -- -- -- -- --
</TABLE>
- -----------
(1) These amounts represent certain assumed rates of appreciation only.
Actual gains, if any, on stock option exercises are dependent upon the
future performance of the Company's Common Stock, overall market
conditions and the executive's continued employment with the Company.
The amounts represented in this table may not necessarily be achieved.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT END
OPTIONS AT END OF 1999 OF 1999 (1)
---------------------- -----------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE (2) REALIZED (3) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John J. Mitcham -- $ -- 241,369 325,000 $944,489 $1,336,400
Joseph R. Canion -- -- -- -- -- --
J. David Cabello -- -- 125,000 375,000 508,000 1,524,000
Kathleen H. Clark -- -- 125,000 375,000 508,000 1,524,000
Alexander H. Frey -- -- 224,500 315,500 883,323 1,266,117
Charles E. Pearsall -- -- 145,500 205,000 569,848 822,938
</TABLE>
- ---------------------
(1) Value calculated as the excess of the market value of the Common Stock at
December 31, 1999 ($4.72) over the exercise price per share. The market
value of the Common Stock at December 31, 1999 represents the average of
the high and low sales price as reported on the Nasdaq SmallCap Market
System. Options are in-the-money if the market price of the shares exceeds
the option exercise price. As of December 31, 1999, all of the options held
by these officers were in-the-money.
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<PAGE> 22
(2) The exercise price may be paid in cash or, in the Compensation Committee's
discretion, by delivery of a promissory note or shares of Common Stock
valued at the fair market value on the date of exercise or pursuant to a
cashless exercise procedure under which the executive provides irrevocable
instructions to a brokerage firm to sell the purchased shares and remit to
the Company, out of the sale proceeds, an amount equal to the exercise
price plus applicable withholding taxes.
(3) Value calculated as the excess of the market value at the date of exercise
over the option exercise price.
CHANGE IN CONTROL ARRANGEMENTS
Under the Company's option plans, in the event a "change in control" of the
Company occurs, all outstanding options held by a participant for at least six
months will become immediately exercisable in full and will remain exercisable
for the remainder of their terms, regardless of whether the participant remains
in the employ or service of the Company or any subsidiary. A "change in control"
for purposes of the Company's option plans will generally occur upon the
following events: (a) the sale or other transfer of substantially all of the
assets of the Company; (b) the liquidation or dissolution of the Company; (c) a
merger or consolidation involving the Company if 70% or less of the voting stock
of the surviving company is held by persons who were stockholders of the Company
immediately before the merger or consolidation; (d) any person becomes the
beneficial owner of 30% or more of the combined voting power of the Company's
outstanding securities ordinarily having the right to vote at elections of
directors; (e) the "continuity directors" (directors as of the date the
applicable plan was adopted and additional directors nominated or elected by the
"continuity directors") of the Company cease to constitute at least a majority
of the Board; or (f) any change of control that is required to be reported under
Section 13 or 15 (d) of the Securities Exchange Act of 1934 (the "Exchange
Act").
In addition to the change in control provisions under its option plans and
agreements, the Company also has in place a change in control agreement with Mr.
Charles E. Pearsall, the Company's Vice President of Engineering. Pursuant to
this agreement (the "Change in Control Agreement"), in the event of a Change in
Control Termination (as defined below), the Company agrees (a) to make a
lump-sum cash payment to the employee in an amount equal to one and one-half
times such employee's annual base salary, plus one and one-half times such
employee's target annual cash bonus for the year during which the termination
occurs, (b) to provide to the employee continued coverage under the Company's
group health plan for up to 18 months, (c) to provide to the employee a
"gross-up" payment sufficient to pay any excise tax imposed under Section 4999
of the Code (or any comparable state or local law) resulting from any Change in
Control (as defined below), and (d) to provide to the employee outplacement
counseling services costing up to 5% of such employee's annual base salary.
For purposes of the Change in Control Agreement, a "Change in Control
Termination" is deemed to occur if the Company terminates such employee's
employment for any reason other than for Cause (which includes gross misconduct,
willful and continued failure to perform, or conviction of a felony or gross
misdemeanor) or the employee's death or the employee terminates his or her
employment for Good Reason (which includes an adverse change in the employee's
position with the Company, reduction in base salary or benefits, forced
relocation, or failure by the Company to observe certain requirements of the
Change in Control Agreement) and any such termination occurs either within 12
months after the last day of the month in which the Change in Control occurred
or prior to the Change in Control if the employee's termination was a condition
of or related to the Change in Control. For purposes of the Change in Control
Agreement, a "Change in Control" is defined to include (a) a merger involving
the Company where the pre-merger stockholders own at least 50% but less than 80%
of the surviving Company's voting stock (unless approved by the "continuity
directors") or less than 50% of the surviving Company's voting stock (whether or
not approved by the "continuity directors"), (b) a transfer of substantially all
of the Company's assets or a liquidation of the Company, (c) the acquisition by
any person or group of 20% or more but less than 50% of
20
<PAGE> 23
the Company's voting stock (unless approved by the "continuity directors") or
50% or more of the Company's voting stock (whether or not approved by the
"continuity directors"), (d) the "continuity directors" (the current directors
and their future nominees) ceasing to constitute a majority of the Board of
Directors, and (e) any other change in control that would be required to be
reported by the Securities and Exchange Commission.
The change in control provisions of the Company's option plans, as well as the
Change in Control Agreement, are designed to attract and retain valued employees
of the Company and to ensure that the performance of these employees is not
undermined by the possibility, threat or occurrence of a change in control.
While these measures were not adopted to deter takeovers, they may have an
incidental anti-takeover effect by making it more expensive for a bidder to
acquire control of the Company.
MITCHAM EMPLOYMENT AGREEMENT
Pursuant to the terms of an employment agreement, dated as of May 2, 1995, Mr.
Mitcham is paid an annual base salary that is determined each year by the
Compensation Committee based on a performance and salary review of Mr. Mitcham.
The base salary was initially fixed at $300,000. In addition to base salary, the
employment agreement provided for the grant to Mr. Mitcham of certain options to
purchase 800,000 shares Common Stock. Mr. Mitcham is also entitled to customary
benefits, reimbursements of business expenses and reimbursement for premiums on
a term life insurance policy up to a maximum of $3,500 per year. In addition,
pursuant to the employment agreement, the Company agreed to reimburse Mr.
Mitcham for his relocation expenses (up to a maximum of $100,000) plus amounts
for any taxes on such reimbursement amounts.
The employment agreement continues until terminated and may be terminated in the
following circumstances: (i) by the Company upon written notice with or without
cause; (ii) by Mr. Mitcham upon 30 days' written notice; or (iii) upon Mr.
Mitcham's death or disability. If the Company terminates the employment
agreement other than for cause or if Mr. Mitcham terminates the agreement due to
a material breach by the Company that is not cured within 30 days of notice, the
Company will be obligated to continue to pay Mr. Mitcham his then current base
salary for a period of two years following such termination, if such termination
occurs within two years after the effective date of the agreement, or for a
period of one year following such termination, if termination occurs thereafter.
Such payments, however, will continue only so long as Mr. Mitcham
conscientiously and aggressively seeks new employment and complies with his
continuing obligations under the employment agreement and will be reduced to
reflect any payments received during such period from another employer.
Pursuant to the employment agreement, Mr. Mitcham has agreed that, during his
employment and for a period of one year thereafter, he will not: (i) compete in
the network server business within any state or country in which the Company
markets or services products or provides services; (ii) interfere in any way
with the Company's relationship with any of its current or potential customers;
or (iii) employ or attempt to employ any of the Company's employees. In
addition, the employment agreement prohibits the disclosure of confidential
information to anyone outside of the Company during and subsequent to Mr.
Mitcham's employment and requires disclosure to the Company of ideas,
discoveries or inventions relating to or resulting from Mr. Mitcham's work for
the Company and assignment to the Company of all proprietary rights to such
ideas, discoveries or inventions.
WRABETZ EMPLOYMENT AGREEMENT
Pursuant to the terms of an employment agreement, dated as of March 1, 2000, Ms.
Wrabetz is paid an initial annual base salary of $200,000. In addition to base
salary, the employment agreement provides for the grant to Ms. Wrabetz of
certain options to purchase 700,000 shares Common Stock. Ms. Wrabetz is also
entitled to customary benefits.
21
<PAGE> 24
If the Company terminates Ms. Wrabetz's employment other than for cause or if
Ms. Wrabetz terminates he employment following a significant reduction in her
responsibilities, Ms. Wrabetz will receive (i) a lump sum cash payment equal to
12 months of her then current base salary, (ii) acceleration of the
exercisability of options that have been held at least six months from the date
of grant and that would have become exercisable during the 12-month period
following her termination, and (iii) a 90-day post termination period within
which to exercise options that are exercisable as of her termination (including
options becoming exercisable pursuant to the acceleration described above).
If a Change in Control of the Company occurs (as defined in the 1998 Plan) while
Ms. Wrabetz is employed by the Company and prior to six months from the date she
commenced such employment, she will receive a lump sum cash payment equal to 12
months of her then current base salary. If Ms. Wrabetz's employment is
terminated for any reason (other than by the Company for cause) within 24 months
following such a Change in Control, her options will become exercisable in full
and will remain exercisable for the remainder of their terms.
INVESTORS AGREEMENTS
In connection with a private placement to certain investors of the Company's
Common Stock in December 1998 (the "1998 Private Placement"), the Company, the
purchasers in the 1998 Private Placement (the "1998 Purchasers"), and John
Mitcham, the Company's Chief Executive Officer, entered into an Investors
Agreement, dated effective as of December 7, 1998, as amended and restated April
13, 2000 (the "Investors Agreement"). Among other provisions, the Investors
Agreement (a) provides the 1998 Purchasers with certain demand and "piggyback"
registration rights; (b) provides the 1998 Purchasers with certain rights of
first refusal to acquire a pro-rata portion of securities sold or issued by the
Company in certain future private placement financings; (c) provides the 1998
Purchasers with rights of co-sale in the event that Mr. Mitcham desires to sell
Voting Securities (as defined in the Investors Agreement) under certain
circumstances; and (d) provides that, as long as Rod Canion (one of the
Purchasers) or his immediate family members and trusts and entities established
for their benefit holds at least one-third of the Voting Securities acquired in
connection with the 1998 Private Placement, the Company will use its best
efforts to cause Mr. Canion, or his designee ("the Investors' Nominee"), to be
elected to the Board of Directors of the Company. The Investors' Nominee will
have the option of choosing when to accept election. Prior to accepting
election, the Investors Nominee will not be permitted to vote, but will be
allowed to attend board meetings as a visitor. Mr. Canion has not yet chosen to
submit a candidate for election to the Board of Directors.
In connection with the 1998 Private Placement, each 1998 Purchaser agreed not to
offer, sell or otherwise
22
<PAGE> 25
transfer any securities acquired pursuant to the 1998 Private Placement without
the prior approval of the Board of Directors except (i) pursuant to a public
offering registered under the Securities Act of 1933, as amended (the "Act"),
(ii) pursuant to Rule 144 of the Act, (iii) pursuant to a transaction that
effects a broad distribution of the Company's securities without resulting in an
acquiring person holding more than 3% of the voting securities of the Company,
(iv) transfers to certain related parties or (v) bona fide pledges to
institutional lenders for money borrowed. The 1998 Purchasers also agreed to not
solicit proxies or become a participant in a solicitation of proxies in
opposition to the recommendation of the majority of the directors of the Company
with respect to the election of directors.
In connection with the 1998 Private Placement, each director and officer of the
Company entered into a lock-up agreement (collectively, the "Lock-Up
Agreements"), pursuant to which each such person agreed that, until the earlier
of June 30, 2000 or three months after the date on which the Company's storage
management software has been licensed for commercial use for 90 days, such
person will not, without the prior written consent of the 1998 Purchasers
holding a majority of the shares sold by the Company in the 1998 Private
Placement, and subject to certain exceptions, sell or otherwise dispose of
Common Stock or rights to acquire Common Stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Almog and Mr. Lucas served as members of the Compensation Committee of the
Board of Directors during 1999. On December 15, 1998, Mr. Lucas, through a trust
with respect to which he is deemed the beneficial owner, participated in the
1998 Private Placement by the Company. Mr. Lucas purchased a total of 75,000
shares of Common Stock at a price of $1.00 per share and received warrants to
purchase an additional 75,000 shares of Common Stock at an exercise price of
$3.50 per share. The warrants are exercisable until December 15, 2003.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and executive
officers, and persons who own more than 10% of the Company's Common Stock, to
file with the SEC initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Executive
officers, directors and greater than 10% shareholders are required by SEC
regulations to furnish the Company with all Section 16(a) reports they file. To
the Company's knowledge, based upon a review of the copies of such reports
furnished to the Company during, or with respect to, the period ended December
31, 1999, and based on representations by such persons, all of the Company's
executive officers, directors, and greater-than-10% stockholders complied with
all Section 16(a) filing requirements.
SELECTION OF INDEPENDENT AUDITORS
The Board has appointed PricewaterhouseCoopers LLP, independent certified public
accountants, as auditors of the Company for the year ending December 31, 2000.
PricewaterhouseCoopers LLP has audited the financial statements of the Company
since incorporation and has no other relationship with or interest in the
Company.
Unless a contrary choice is specified, proxies solicited by the Board will be
voted FOR ratification of the appointment of PricewaterhouseCoopers LLP as
auditors for the Company for the year ending December 31, 2000.
23
<PAGE> 26
Representatives of PricewaterhouseCoopers LLP will be present at the meeting,
will have an opportunity to make a statement if they so desire, and will be
available to respond to appropriate questions.
PROPOSALS FOR THE NEXT ANNUAL MEETING
Stockholder proposals intended to be presented in the proxy material relating to
the next Annual Meeting of Stockholders must be received by the Company on or
before December 17, 2000.
A stockholder who wishes to make a proposal at the next Annual Meeting without
including the proposal in the Company's proxy statement must notify the Company
by March 1, 2001. If a stockholder fails to provide notice by this date, then
the persons named as proxies in the proxies solicited by the Company for the
next Annual Meeting will have discretionary authority to vote on the proposal.
OTHER BUSINESS
The Company knows of no other matters that will be presented at this year's
Annual Meeting of Stockholders. If any other matter properly arises at the
meeting, it is intended that the shares represented by proxies in the
accompanying form will be voted in accordance with the judgment of the persons
named in the proxies.
ANNUAL REPORT
A copy of the Company's Annual Report to Stockholders for the year ended
December 31, 1999 accompanies this Notice of Annual Meeting and Proxy Statement.
The Annual Report describes the financial condition of the Company as of
December 31, 1999.
THE COMPANY WILL FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM 10-K
(EXCLUSIVE OF EXHIBITS) FOR THE YEAR ENDED DECEMBER 31, 1999 TO EACH PERSON WHO
IS A STOCKHOLDER OF THE COMPANY AS OF APRIL 7, 2000, UPON RECEIPT FROM ANY SUCH
PERSON OF A WRITTEN REQUEST FOR SUCH AN ANNUAL REPORT ON FORM 10-K. SUCH
REQUESTS SHOULD BE SENT TO: TRICORD SYSTEMS, INC., 2905 NORTHWEST BOULEVARD,
SUITE 20, PLYMOUTH, MINNESOTA 55441, ATTENTION: INVESTOR RELATIONS.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ THOMAS C. THOMAS
-----------------------------------
Thomas C. Thomas
Secretary
April 21, 2000
Plymouth, Minnesota
24
<PAGE> 27
TRICORD SYSTEMS, INC.
2905 NORTHWEST BOULEVARD, SUITE 20
PLYMOUTH, MINNESOTA 55441
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF TRICORD
SYSTEMS, INC.
The undersigned, having duly received the Notice of Annual Meeting of
Stockholders and Proxy Statement dated April 21, 2000, appoints John J. Mitcham
and Thomas C. Thomas and each of them, as Proxies, each with power to appoint
his substitute, and hereby authorizes each of them to represent and to vote, as
designated below, all shares of common stock of Tricord Systems, Inc. held of
record by the undersigned on April 7, 2000, at the Annual Meeting of
Stockholders to be held on May 18, 2000, or any adjournments thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES NAMED IN PROPOSAL
1 BELOW AND FOR PROPOSALS 2, 3 AND 4
1. Election of Directors
- For the nominees listed below - Withhold Authority to vote for the
nominees listed below
NOMINEES FOR ELECTION
Donald L. Lucas
Fred G. Moore
2. Proposal to approve an amendment to the Company's 1998 Stock Incentive Plan
to increase the number of shares of Common Stock reserved for issuance
thereunder by 3,000,000 shares to a total of 8,000,000 shares (plus any
shares reserved for issuance, but not issued, under the Company's 1995
Stock Incentive Plan).
- For - Against - Abstain
3. Proposal to approve an amendment to the Company's 1998 Non-Employee
Director Stock Plan to increase the number of shares of Common Stock
reserved for issuance thereunder from 550,000 to 800,000 shares.
- For - Against - Abstain
4. Proposal to ratify the appointment of PricewaterhouseCoopers LLP, certified
public accountants, as independent auditors for the Company for the year
ending December 31, 2000.
- For - Against - Abstain
5. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
(continued and to be completed and signed on the reverse side)
(continued from other side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS 2, 3 AND 4 ABOVE AND TO GRANT AUTHORITY TO VOTE
FOR THE NOMINEES NAMED IN PROPOSAL 1 ABOVE.
PLEASE SIGN exactly as the name appears on this card. When
shares are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation,
please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in
partnership name by authorized person.
Dated:
------------------------------------------------
Name of Stockholder(s)
------------------------------------------------------
Signature
------------------------------------------------------
Signature if held jointly
------------------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.
